Wisdom from Vancouver Conference – Jan. 22-23, 2012
Approximately 10,000 attendee’s witnessed the best mind’s on monetary and economic issues!
After attending one of my favorite money conferences, I would like to summarize some of the views which seemed most relevant and which made an impact upon me as an attendee. The following speakers seemed most impressive and knowledgable on the issues that they presented:
1. Danielle Park, www.jugglingdynamite.com: This lady seemed exceptionally knowledgeable and current on all the financial issues and current trends. Danielle’s viewpoint can be summarized as follows: She see’s no inflationary pressures evident in the world economy and, therefore, she is bearish on commodities and most stocks. She stated that the next downturn could be significant. The velocity of money flows suggests that money is not going into growth but is sitting in holding patterns in banks and corporations. Practically all Hedge Funds lost money in 2011. The world markets are highly leveraged again and this is a dangerous signal. The secular bear market will continue for another 5-7 years. CASH is king and the worship of cash will continue for some time. Danielle is not interested in investing in either silver or gold. She likes CASH and preservation of one’s purchasing power in these markets. Comment: this lady was one of the best at the conference. Her weakness, in my view, is that she seems unaware of our collapsing ‘fiat’ currencies…and the real role of gold and silver when ‘fiat’ currencies are collapsing all around us. Presumably, she thinks that our ‘dollar’ is a thing of value and can be salvaged from extinction. I would disagree on this viewpoint.
2. Gordon Chang, www.gordonchang.com: Gordon thinks that China is faltering badly. Factories are closing, electricity consumption is declining, workers are protesting, container ships indicate downturn, and $ reserves are now starting to decline. The past 35 years of uninterrupted growth is now over…and the wheels are coming off this engine of growth. Going forward, urbanization will slow down and this will affect growth to the negative. Currently, there are many ‘ghost’ cities that have sprung up with no occupancy. Real estate values are starting their decline. Total debt to GDP is now over 800%. China’s leaders will attempt to ‘kick the can down the road’ for the time being. Comment: Mr. Chang was quite impressive with his knowledge and understanding of the issues. His counterpart was Frank Holmes, www.usfunds.com. Frank viewed the situation in China as positive with growth continuing. Personally, I did not find his presentation as convincing as that of Gordon Chang. Each of you will need to decide for yourself which view is most realistic.
3. James Turk, www.goldmoney.com: Mr. Turk is the foremost expert on the history of money and the role of gold in our economy. James thinks that hyper-inflation is coming down the road. This leads him to forecast an eventual price for gold of $8000 or more. He sees mining companies as a good option now…as costs are down relative to revenues which can be realized (given the price of gold at $1600 and growing). A Bull Market on most mining stocks in 2012 will create great profit opportunities. Silver could likely outperform gold in 2012 as the historical silver/gold ratio is 16:1 and this ratio is currently out-of-line at its current ratio of 50:1. This ratio is likely to be closer to 30:1 by the end of 2012. Gold is money as it was chosen by the people some 5000 years ago as money. Comment: James has a great understanding of money and precious metals history. His view that hyper-inflation is coming down the road is unlikely, however. What is now happening is deflation and value destruction on a massive scale worldwide. This deleveraging and value destruction can not be reversed given that investors and consumers are not borrowing as in prior periods. Massive credit expansion creates hyper-inflation and this is not occurring given our digital money markets today. You can bring a horse to water but you can not make the horse drink. Without new borrowing and credit expansion, deflation and value destruction will happen…its a ‘snowball from hell’ once it gets moving! What we are likely to see in the future are more bankruptcies, foreclosures, and insolvencies on a growing scale. This trend is unlikely to lead to hyper-inflation as Mr. Turk assumes!
4. Jay Taylor, www.jaytaylormedia.com: Mr. Taylor is an Austrian economist and investment advisor. Jay is very knowledgeable on the history of banking, the Fed, and general economic issues. Jay thinks that the Fed was created to help the ruling elite control the money markets and future political trends. Jay now thinks that the Fed and the 2900 banks under the direction of the Fed have created DEBT that can not be repaid. He stated that Bernanke has recently created $2 trillion just to bail-out the European banks…and this process is likely to continue until the system collapses. Jay envisions a major credit contraction coming with DEFLATION as a consequence. He concludes that the Bretton Woods System created after WWII is now totally broken. He does not think that the European debt and deficit situation can be solved. All these events, he thinks, is positive for gold and gold shares. His top gold pick for 2012 is a company called Sandstorm Gold. Comment: Jay Taylor was one of the most informed economists at the conference and his judgment does not differ much from mine. My view is that a Deflationary/Depression is coming and this will be evident before 2012 ends.
In conclusion, the Vancouver Resource Conference, www.CambridgeHouse.com, was excellent and very informative. Personally, I would suggest that our economic situation is dire going forward. The problem is our digital money unit, debt, deficits, foreclosures, bankruptcies, insolvencies, centralized monetary creation by our Fed and other Central Banks, and an economic model (Keynesianism) which is broken. Going forward, we need to be thinking about a new economic MODEL/SYSTEM which promotes individual freedom and choice over CENTRALIZED administration. This reality, however, is unlikely until our current non-System totally collapses. At that point, the people will desire meaningful CHANGE. As of today, the best that can be expected is MORE OF THE SAME.
Stay current by keeping this website as one of your favorites: http://kingdomecon.wordpress.com. Enjoy
P.S. Ben Bernanke’s news conference today, 01/25/12, suggests that everyone should give gold and silver a new ‘look’ for the coming months. Ben appears ready to create more QE $ later this year as conditions worsen. This policy, however, will not create any hyper-inflation…but it will be good for those invested in gold and silver. Ben seems totally unaware of what is happening in the greater marketplace and if he is deceived about these markets, then most must also be deceived. Ask Ben this question: Where does he get his QE $ from? What is ‘thin air’, Ben?
What is the ‘price’ of GOLD…if a currency loses its ‘legal tender’ status? Price and Value are not the same!
All commodities are ‘priced’ in some legal tender currency. What happens if a currency is abolished or declared invalid…no longer acceptable as ‘legal tender’? Price (of gold) is not the same as ‘value’!
We all assume that conditions now in practice (within our marketplace) will continue forever…but is this a good assumption given today’s volatile markets? As of this writing, many countries are starting bilateral currency exchanges to avoid the American ‘dollar’. Also, many countries now are so loaded up with ‘dollar’ debt (China, Japan, Britain) that they are desiring to decrease their current holdings. Currently, our ‘dollar’ is the reserve currency for all world trade and is accepted by almost all nations as legal tender. Will this legal status continue for our ‘dollar’ going forward…indefinitely? Let’s think about what could happen in the near future as nations seek ways to avoid the ‘dollar’ and ‘dollar’ accumulations.
This situation is now happening with trade for the nation of Iran as of January, 2012: http://youtu.be/6u7KnXyrKmQ
Iran and Russia replaced the U.S. dollar with their national currencies in bilateral trade, Iran’s state-run Fars news agency reported, citing Seyed Reza Sajjadi, the Iranian ambassador in Moscow. The proposal to switch to the ruble and the rial was raised by Russian President Dmitry Medvedev at a meeting with his Iranian counterpart, Mahmoud Ahmadinejad, in Astana, Kazakhstan, of the Shanghai Cooperation Organization, the ambassador said. Iran has replaced the dollar in its oil trade with India, China and Japan, Fars reported.
The BRIC nations have also expressed a desire to reduce the role of the ‘dollar’ via bilateral trades and eventually as a settlement mechanism:
April 14, 2011 BRICS Desires To Replace the Dollar as World Currency
These news items demonstrate that our ‘dollar’ which has served as the global reserve unit since the Bretton Woods Agreement of 1944, could be on its LAST legs. Let’s assume that the global marketplace (most of the major emerging trading nations) desire to replace our ‘dollar’ with either a barter situation or a combination of barter and their local currencies (as Iran is now doing). How could this affect ‘prices’ of commodities like oil, copper, wheat, corn, silver, gold, etc.? What if our current ‘dollar’ is also rejected by the American people…and declared no longer ‘legal tender’? How would this affect ‘prices’ (say of oil or gold)?
Most pundits ASSUME that everything will remain the same…forever. But is this a wise and valid assumption going forward? There are many forces now wanting to CHANGE our monetary system. There is currently a bill circulating in our Congress called the NEED ACT. This act is being proposed by Congressman Kucinich of Ohio and his description of this act and its implications can be viewed here: http://youtu.be/BYGuactD1-U. Basically, this ACT (if passed by our Congress) would eliminate the Fed and create a new fiat ‘dollar’ which would be created by Treasury personnel (say Geithner, et al). To accomplish this goal, it is likely that our current ‘dollar’ would need to be legally abolished and a new Kucinich dollar would emerge (as our official unit).
We also have Congressman, Ron Paul, who desires to abandon our current ‘dollar’ and return to some type of GOLD STANDARD. This goal would also require that our current ‘dollar’ be changed, abolished, or declared non-legal. What would these types of proposals do to ‘prices’ of goods and services in our economy? Keep in mind that all goods and services are ‘priced’ in a legal tender unit that is officially declared the ‘coin of the realm’. So if our current ‘dollar’ were no longer ‘legal tender’ (for all debts public and private), then we could have a major problem in our marketplace…instantaneously and immediately! Let’s think about this situation as a thought experiment!
What would be the ‘price’ of an ounce of GOLD without our current legal tender ‘dollar’ being officially valid? What would be the ‘price’ of a barrel of OIL without our current legal tender ‘dollar’? What would be the ‘price’ of your HOUSE, CAR, LAND, and FURNITURE…given this scenario? Do you sense that we could be back to a BARTER mentality with ONE official decision…a declaration that our current ‘dollar’ is no longer ‘legal tender’? Every item that you now observe around you could have NO ‘price’ (in current dollars). Gold would immediately go to ZERO (in current dollars). All other goods and services would also go to ZERO. Why is this so!
To understand money we must recognize that money starts out as IMAGINARY (a concept of one’s mind). The names, numbers, and symbols (say $1.00) that we use to denote ‘prices’ in the marketplace are really ‘imaginary’ units (derived from our individual consciousness). Why do you think that Ron Paul and many others accuse our Fed Chairman, Ben Shalom Bernanke, of creating MONEY…’out of thin air’? What is ‘thin air’…in reality? Another word for ‘thin air’ might be NOTHING (no thing)! In other words, our DOLLAR (which we use to ‘price’ all our goods and services) is really NOTHING (an imaginary unit, totally subjective, or a unit derived from one’s consciousness). What does this MEAN for ‘prices’? What does this mean for asset VALUES?
To understand money and prices we need to understand what has happened to our historical MONEY. Back in our Colonial days (prior to 1776) and up until 1971, our ‘money units’ were a ‘name’ for a real physical THING (silver, gold, copper, some base metal, or paper). The ‘name’ dollar described some THING outside my/your mind. Today, our current ‘dollar’ is NOTHING (no thing within spacetime). Our ‘dollar’ is now derived mostly from the MIND and CONSCIOUSNESS of Ben Shalom Bernanke and his FOMC committee. These policymakers ‘create’ units of dollars (now just digits in the computer) as our MONEY. Where do these ‘units’ derive from (some 95% of money transactions are now digital)? What are these ‘units’…in reality?
Ben Bernanke (USA), Mervyn King (England), Mario Draghi (Eurozone) and other central bankers now just ‘create’ units (called currencies or money) via their HFT (high frequency trading) COMPUTERS. How is this done? Ben Bernanke, today, can just THINK up a number (say the recent $600 billion QE number) and then order the manager at the trading DESK (at the NY Federal Reserve Bank) to credit the SOMA (system open market account) with $600,000,000,000 of units (digits in the computer…which we call ’dollars’). What a neat trick for creating ‘money’…out of what Ron Paul calls…’thin air’! Is this a SHELL GAME or not? Is this equivalent of ‘money from heaven’?
Bernanke can now create digits in his computer screen (his SOMA checking account) and then distribute these units (called cash or dollars) to whomever he needs to bail-out. Money appears from ‘heaven’ for Bernanke and his friends. What a great system for those with connections and special financial needs within the connected establishment. This same process is used by Mervyn King at the Bank of England and could be used by Mario Draghi and all the other Central Bankers on this planet. Does this system and process sound Constitutional or American? Would our founding Fathers of money, Thomas Jefferson and Alexander Hamilton, bless this system and process?
What we experience today in the monetary arena are fictitious and imaginary manipulations of our economy and all the ’prices’ within our global economy. This has all evolved over the years since the closing of the ‘gold window’ in 1971. This event on August 15, 1971 (called the Nixon Shock) allowed this entire current system and process to emerge. When President Nixon removed all ties of our ‘dollar to a physical commodity and also disallowed any convertibility of our dollar into gold, this decision set in motion the system and process which we now experience. Historically, money units have always been some THING which existed in spacetime. Spacetime is usually viewed as ‘outside’ one’s MIND or consciousness.
Today, however, we do not have a physical unit for our money. Most of our financial transactions today are via the digital units which we experience within our computer screens. Virtual reality has replaced spacetime reality when it comes to our money (less than 4% of money transactions are now done with paper or metal coins). The best method for visualizing this reality (spacetime reality) is to observe our planet and people from the perspective of ‘outer space’ (say an earth satellite view). This you can do by clicking on this link: http://3planeta.com/subject/maps.html. You can observe live images of: Central Park in New York, the Giza Pyramids, or even your personal house. All these images should be viewed as ‘outside’ one’s MIND. Virtual reality, in contrast, can be experienced by looking at the computer screen directly in front of your nose at this moment. There is a distinct difference! Virtual reality is really an extension of the human MIND; whereas, spacetime reality is ‘outside’ one’s mind (as are gold, oil, silver, wheat, corn, lumber, gas, land, buildings, trees, etc.).
In conclusion, ‘prices’ today are mostly meaningless and imaginary. The reason for this fact is our money unit (our current dollar). This type of unit creates distortions in value, volatility in prices, manipulation of our economy by a select elite, and the coming financial flash crash that is likely sometime in 2012. Keep in mind that a commodity like gold can have a ZERO ‘price’ in fiat currencies and yet substantial ‘value’ as a trading or exchange unit. This is now starting to happen as the American ‘dollar’ is being rejected by many Nations as a settlement unit.
Who will recognize the reality of this missive? The only presidential candidate that seems to have a comprehensive understanding of money and money manipulation is Ron Paul, Congressman from Texas. All the other candidates (Romney, Gingrich, Obama, and Santorum) seem unaware of what is now happening within our global monetary system. Will they become AWARE prior to election date 2012? Given the nature of the internet, I would think that they will. If you desire, you have my permission to pass this missive on to any one of them. Enjoy…and keep watching the digital markets for serious change in 2012 and beyond! http://kingdomecon.wordpress.com.
P.S. Update on currency swap agreement by China:
China signs currency swap deal with UAE
(China Economic Net)
08:54, January 19, 2012 
Edited and translated by Yao Chun, People‘s Daily Online
People‘s Bank of China, China‘s central bank, said on Jan. 17 that it has signed a 35-billion-yuan (5.6 billion U.S. dollars) currency swap agreement with the Bank of the United Arab Emirates (UAE).
The agreement will last for three years and is extendable by mutual consents, according to a statement posted on the website of the People‘s Bank of China.
The swap is aimed at enhancing bilateral financial cooperation and promoting trade and investment as well as ensuring regional financial stability, it said.
Since the onset of the global financial crisis in late 2008, China has signed a total of 1.3-trillion-yuan currency swap agreements with 15 countries and regions such as South Korea, Malaysia, Hong Kong, Belarus, Argentina, etc. Some of the agreements have taken effect and promote the bilateral trade and investment between China and these economies.
The history of our ‘dollar’ reveals why PRICES and VALUES are unstable and volatile today!
Today we have a currency unit called the ‘dollar’ which is our legal tender for all debts (public and private). This unit has evolved over the years since its founding in 1785. After the collapse of the Continental, which was our Nation’s first experiment with public money, two key Americans were instrumental in choosing our ‘money unit’ (also called currency unit) for our Nation. Thomas Jefferson was the key person who chose the name ‘dollar’ for our money unit. He was also instrumental in choosing the subsidiary coinage (half-dollar, quarter, dime, nickel, and penny) which we adopted in the Coinage Act of 1792. The other founding Father which helped with these issues was our first Secretary of Treasury, Alexander Hamilton.
Both of the above founders, along with select members of our Congress, chose the ‘names’ for our currency units as well as the definitions for the various units. Jefferson understood that a sound money unit was essential for our Country and for sound growth within our Capitalistic economy. Jefferson and Hamilton were both in support of the Coinage Act of 1792 which established our money units. Since the founding of our ‘dollar’ in 1792, the following changes have occurred. Each of these changes has created a new meaning for our ‘dollar’ and for our economy. Following is a brief overview of this evolution in the meaning of our ‘dollar’:
1. Dollar #1: the ’name’ dollar was chosen and approved by our Continental Congress in 1785. This ‘name’ had no definition (it was totally a fiat unit with no reality).
2. Dollar #2: the name ‘dollar’ was defined in 1792 as $1.00=371.25 grains of silver (this definition was derived from assaying the Spanish silver dollar in the Colonial marketplace). Indirectly, our ‘dollar’ was also viewed as 24.75 grains of gold. This was derived from the 15:1 ratio between silver and gold in the marketplace. Our ‘dollar’ now had a specific meaning as a commodity currency with silver/gold as its backing.
3. Dollar #3: a new meaning emerged in 1834 as the silver/gold ratio had changed to 16:1 in the marketplace. Congress then redefined our ‘dollar’ as 23.20 grains of gold (the definition in terms of silver was dropped).
4. Dollar #4: another new meaning emerged in 1934 during the FDR administration. Our ‘dollar’ was further changed to 13.71 grains of gold. This new definition created a value for 1 ounce of gold as $35.00. This definition remained as the official definition of our ‘dollar’ until Nixon closed the gold window on August 15, 1971.
5. Dollar #5: a new calculation was derived in 1973 for our ‘dollar’ at 12.63 grains of gold. This new definition was meaningless as no convertibility was allowed in the marketplace. This new calculation was made to reflect the higher price of $38/ounce for gold in the marketplace.
6. Dollar #6: another new calculation emerged in 1974 as the price of gold reached a new level in the marketplace ($43/ounce). This new calculation for our ‘dollar’ was 11.37 grains of gold. This definition was also meaningless as no convertibility was allowed in the marketplace. Shortly after this event, gold in the marketplace reached $850/ounce (1980) as fear emerged that our ‘dollar’ was worthless. Once again, the meaning of our ‘dollar’ changed!
7. Dollar #7: with the abandonment of any backing or convertibility for our ‘dollar’, our Congress approved a new fiat ‘dollar’ for our Nation and the World in 1975. This ‘dollar’ led to the creation of our ‘index dollar’ (a number calculated as a weighted average of some six unique world currencies). This ‘index dollar’ has been viewed as a paper unit as most units were printed until the emergence of the computer. This ‘dollar’ has also been viewed as a fiat currency with no backing or intrinsic value. Some called this new currency regime which emerged in 1975 the ‘Floating Currency System’. Once again, the meaning of our ‘dollar’ changed!
8. Dollar #8: with the emergence of computer technology in the 1980′s and 1990′s, a new ‘dollar’ evolved. This new ‘dollar’ was the ‘digital dollar’ which became the talk of the marketplace after the CRASH of 2008. This ‘dollar’ allowed our Federal Reserve Bank to create new units (dollars) with the click of a computer mouse. Most of us have watched as our Fed Chairman has created $trillions (some say as much as $16 trillion) of new units (now digits in the computer screen) as our money. The QE policies of Ben Shalom Bernanke have become a major issue of conversation in the marketplace and among economic pundits. Ron Paul has popularized the policies of the Fed and their creation of units (called dollars)…’out of nothing’! Is this a viable process going forward? What meaning does this convey to the world?
The above evolution of our ‘dollar’ shows the changes in meaning that has occurred since our dollar was founded in 1785. We now have a VIRTUAL dollar as 95% of all money transactions are done via our new computer dollar. We witness this new dollar as we watch our computer screens from day-to-day. All our stock and money markets are now digital markets. Electronic money has emerged and this has changed the meaning of our dollar and the concept of money. The volatility, price fluctuations, flash crashes, and world exchange problems are directly related to our new digital money and the administration of this money unit.
The consequences of these changes has led to a new global marketplace where prices change from moment to moment. Stability in prices is now impossible as our Central Banks manipulate the markets with their QE and monetary policies via their HFT computers. Our new ‘dollar’ is now mostly VIRTUAL (95% of transactions are now electronic) and this means that most financial assets are also now mostly VIRTUAL assets. Even our Treasury securities are now traded as virtual instruments via Treasury Direct: www.treasurydirect.gov. Practically, all stocks and similar instruments for trading are now VIRTUAL concepts. We now live with a new virtual ‘dollar’ and mostly virtual financial instruments. Is this Capitalism?
Finally, is our current virtual ‘dollar’ actually Constitutional. Does a VIRTUAL dollar qualify as legal tender in a strict legal sense? Is our Congress aware of the above changes to our money units and the implications of this change? The implications of a money unit that is created by a centralized group of policymakers (our FOMC) and manipulated via HFT computers does change the fundamentals of Capitalism. Can a centralized body of policymakers really stabilize prices and create confidence with their QE and similar policies. The next few years should be instructive for all of us.
Anyway, we all need to understand what is now happening with our monetary system. Should a small group of elite bankers have the power and control over our entire ‘free market economic system’? Can the current debt and deficit situation be resolved with this type of system? My personal view is negative. The model that we now follow is not viable for the longer term. In fact, I don’t think this system can last for another decade. Our problem today is our ‘dollar’ and the administration of this unit. We now have a centralized group of elite bankers who essentially run our economy. Is this the type of Capitalism that Americans want for our future? The election of 2012 should bring all these factors to the attention of all Americans. What type of change to Americans really desire?
Our future is either the Obama type future based on the European model of government (collectivism) or a future model which puts the individual prior to the group (freedom). Freedom, in my view, must win this battle! Enjoy and give the above evolution of our ‘dollar’ some thought: http://kingdomecon.wordpress.com.
Understanding Monetary Policy in our New Age of Digital Money
Click for video on ECB monetary policy…now mostly electronic manipulations by authorities: www.ecb.europa.eu/ecb/educational/movies/mopoinstr/html/index.en.html
The entire model for Central Banking has changed and few understand what has happened in recent years. The old system of paper currencies and metal coins is rapidly being replaced with digital units. Virtual reality is replacing empirical reality and few seem to understand the implications of this change. This video might help you understand what is happening: http://www.ecb.europa.eu (click on educational, then videos). Monetary policy is now controlled via digital injections (called liquidity injections). The platform used for most operations and transmissions are webs of high frequency computers…all controlled by just a few centralized policymakers. This operation over in Europe is very similar to the operation of our Federal Reserve here in the United States. It’s suppose to stabilize ‘prices’ in the marketplace but it does just the opposite.
The current digital model is a Top/Down system with a governing council (similar to our FOMC) at the controls. The lead policymaker in Europe is Mario Draghi, President of the ECB. This policymaker acts and makes his decisions using a ‘group think’ board similar to what Bernanke uses in the U.S.A. The system seems so logical and modern on the surface but for those of us who understand the history of money…we can discern the fallacies and shell games which are built into this system. The digits, now used for money, are really ‘virtual units’ created from the MIND’s of the key policymakers. The concept of ‘money’ today derives totally from one’s consciousness (a non-material and non-physical source). What happens as these imaginary units enter the marketplace?
These units are distributed via an electronic transmission system at near the speed of light…from computer to computer. The above video tends to lead the viewer into thinking that ‘money units’ are still mostly paper and coins…yet a discerning viewer will see through this shell game. Money units today are IMAGINARY units which display as numbers in our computer screens. Who can discern the difference between ‘virtual reality’ and ‘spacetime reality’? I would suggest that the majority of professionals today can not discern the difference.
The history of money and Capitalism, however, is based on physical units for a medium of exchange and standard of value. The above video does mention gold and the gold standard but it concludes (falsely) that money is merely a tool for ‘price’ and purchase transactions. In reality, money is supposed to be a tool for the ‘valuation’ of an asset or product. When we exchange a good or product (say our personal house) the issue (in our mind) is ‘what is the fair value’ for this good or product. If the money unit is ‘nothing’, ‘imaginary’, and a virtual ‘digit’…how can this unit be viewed as a ‘standard of value’ or a ‘store of value’? Do real Capitalist’s want to ‘store’ an imaginary digit as their ‘value’…especially when this unit is created and manipulated by a policymaker with a HFT computer to influence ‘prices’ in the marketplace (like a Central banker)?
Let’s think about the real role and purpose for money. Our founding Fathers and our Constitution spell out the role for money in Article I, Section 8. Congress is supposed to coin money and regulate the ‘value’ thereof. To regulate ‘value’ our DOLLAR needs some substance to it. Our DOLLAR needs a ‘definition’. What is a ‘name’ like DOLLAR with no ‘definition’? What is a ‘symbol’ and ‘number’ ($1) with no definition? I would suggest that a ‘name’ and a ‘number’ as our money creates a MONETARY dictatorship. Whoever, has the AUTHORITY to create this ‘name’ and ‘number’ becomes the SOURCE of ‘value’.
Today, the SOURCE of ‘value’ is Ben Shalom Bernanke in the United States of America and Mario Draghi in Europe. These two individuals do use their AUTHORITY to ‘create’, ‘manipulate’, ‘influence’, and impose their personal economic agenda on the entire marketplace. They can do this because our ‘money’ today is ‘NOTHING’ (no thing). They can create units from their MIND or CONSCIOUSNESS and click their thinking into action via a HFT computer. Is this Capitalism? Is this Constitutional? Does this create market Confidence? Does this manipulation create stable Prices? I don’t think so…nor do I think that this system will create stability, prosperity, or confidence.
Take the time to watch this video again: www.bankofengland.co.uk/education/inflation/qe/video.htm. This video demonstrates how digital units (called pounds) are used by the key policymaker in England, Mervyn King, to manipulate and influence ‘prices’ in his marketplace. Is this real Capitalism or is this just monetary dictatorship over the market process? Where does Mervyn ‘get’ these digital units from? Do any of these ‘units’ contain any real ‘value’…which can be stored or saved as ‘surplus productivity’…the real purpose for saving? Do units derived from the MIND or CONSCIOUSNESS of Mervyn (say his recent 75 billion QE program) and entering the market secretly by stealth create CONFIDENCE…once a person understands this manipulation?
Money is supposed to be the ‘lifeblood’ of Capitalism. How can non-material/non-physical ‘money’ serve as the ‘lifeblood’ of a Capitalistic System? Did our American founding Fathers desire a DICTATORSHIP over the market process and the distribution system…as we now experience with DIGITAL money? What happens to this type of ‘money’ if a Bank Holiday is necessary? What happens if the computer system shuts down? What happens if these digital units are given just to the 1% who control all of Wall Street? Is any of this the type of Capitalism which the common man can support?
I think it is time for all the American and European people to WAKE UP and smell the ‘smoke’ and ‘corruption’ now occurring within the ‘halls of politics and economics. Read some history on the role of money in a Capitalistic economic system. Read some history about the power of money to influence leaders in high positions of POWER. Ask yourself if the Fed is really an institution that you want to support. And then question your 2012 presidential candidates on their understanding of what is now happening. Who really understands ‘money’ , our Constitution, and Capitalism? Does Mitt Romney understand money and economics? What about Rick Perry, Newt Gingrich, or Rick Santorum?
Personally, I would suggest that none of the above understands how our non-System works. None even seems to desire to understand. Why is this so? The only person with some common sense on these issues is the Congressman from Texas, Ron Paul. This person, however, is shunned by the establishment media, most Americans, and even those who understand our monetary history. Anyway, now may be a good time to learn why our current SYSTEM is corrupt and collapsing. Check out these website to learn more about these issues: www.kingworldnews.com, http://thecomingdepression.blogspot.com, www.thecomingdepression.net. Enjoy and keep this website on your favorite list: http://kingdomecon.wordpress.com.
Will the EuroZone break-up and will a new United Europe emerge?
The situation over in Europe is reaching its nadir and the consequences that are likely to evolve will affect all the global markets soon. Currently, there are 17 nations that make up the EuroZone. Some of these nation/states are financially quite strong and some are quite weak. Can this mixture of stong and weak states continue to operate as one united political community? Will the strong (10 states) continue to support and bail-out the weak (7 states)? What is the problem with this community of euro countries and why must change happen soon? What impact will this change have upon the American economy and our future trends?
First of all, let’s understand the core problem. When this community of nation/states started in 1999, each state agreed to use the euro currency as their state’s legal tender for all debts (public and private). This agreement seemed logical at the time as each state was experiencing growth, confidence, and prosperity. Each state could borrow and spend using their euro currency and then collect their individual taxes to service all their debt and deficits. As long as growth, inflation, prosperity and confidence continued, this process worked great. What, however, emerged as public debt grew to unsustainable levels after 2008, budget deficits continued, and trade deficits emerged. All this started to occur after the financial Crash of 2008.
What happened is that states with these deficit and debt issues needed more borrowed funds in order to balance their budgets. Furthermore, the investment markets started to lose confidence in these assets (and many of the banks holding these assets) and this has made the problem worse…as interest rates on their debt increased and asset values declined. Then the rating agencies, especially Standard & Poor’s, downgraded many of these states to junk status (Greece, Portugal, and Cyprus) and lowered the rating of most of the others (France, Austria, Italy, Spain, Malta, Slovenia, Ireland, and Slovakia). This leaves only Germany, Belgium, Finland, Luxemburg, Estonia, and the Netherlands as relatively strong states. So what is likely to happen as we move forward in 2012?
It seems quite likely that the 17 state block of countries will either need a total bail-out by the strong members (primarily Germany) or the entire community will break-up into a new format. It seems logical as of now that a break-up into a northern group and a southern group is possible. The ten stronger states that might make up the northern group are: Germany, France, Austria, Belgium, Finland, Luxemburg, Netherlands, Slovakia, Estonia, and Slovenia. The seven state southern group could consist of Cyprus, Malta, Greece, Portugal, Italy, Ireland, and Spain. this concept of weak states and strong states tends to follow the historical emotional mentality of the people of each state. Countries that follow a disciplined budgetary mindset (the German mindset) can function communally and those which do not must fend for themselves.
The other possibility is that the weaker states may just go back to their old currency and political system and ignore any type of political/monetary union. All this change is likely to be chaotic and unsettling for Europe and the World in 2012. What Germany really desires is a new political union which allows for both monetary and fiscal policy (similar to our American system). This community would have a common Currency and a common Treasury (tax system). 2012 should be a year of major change in Europe as the weaker states collapse as deficits and debt become totally unsustainable. A lack of confidence in the European banking system and their political leaders could help to create this chaotic situation…especially for those countries now in the ‘junk’ bond category.
The consequences for the American economy and for American investors could be substantial and potent. First of all, a collapse of asset values within the banking system of major European banks would create similar declines in asset values globally. This domino effect could then create the beginning of the Greater Deflationary Depression that I have been predicting. As asset values decline substantially (30-70%) this means insolvency for many financial institutions. This then leads to a bank Holiday or similar. It is very unlikely that the Hyper-inflationary scenario envisioned by most pundits will occur in this environment. Will the Central Banks QE policies have any major effect in this environment? I sincerely doubt this. Why?
The simple answer is: ‘you can lead a horse to water…but you can not make the horse drink’. In other words, creating new digits in the accounts of insolvent banks is unlikely to lead to new lending or meaningful economic growth. Keep in mind that 96% of all new money creation is now electronic digits in major commercial bank accounts. Will these banks actually lend out these units (dollars or whatever) to borrowers who invest these funds in meaningful new projects? If not, then all the QE efforts are meaningless and mostly ineffective. Money must be lent and new meaningful projects must use these funds for new growth. If this is not done, then our economy deflates.
Deflation and depression are coming as the above events emerge in 2012. Those who envision Hyper-inflation and asset inflation are thinking about events with an outdated model in their minds (in my opinion). If our Central Banks actually ‘printed’ units of money as in Zimbabwe or Weimar Germany and if these ‘printed’ units were distributed to the general public for spending, then a Hyper-inflationary scenario could develop. Our monetary environment today, however, involves computer digits as our money (96%). This type of model is much more likely to lead to a Deflationary Depression. Asset values could decline substantially and major institutional insolvency and bankruptcies would occur. 2012 should be an interesting year for learning about economics and money.
In conclusion, Europe is unlikely to solve its debt, deficit, and balance of trade issues in 2012. Furthermore, the euro currency is unlikely to work for the weaker states within the EuroZone. This means some type of collapse and restructuring for many of these states. The stronger states (with Germany as the leader) should continue to function and solve their monetary and political issues. A new agreement which leads to a fiscal and monetary union is likely (similar to what we now experience in the United States of America). The stronger states are most likely to be those which are chosen by a German leader (the northern block of states). The weaker states are likely to combine and/or break-up into separate states. What investments might be best during this transition?
Personally, the U.S. Dollar may initially experience more strength and value during this chaotic period. Deflation should favor the ‘dollar’ for a short time period. After a period where confidence collapses and investors recognize the implications of the situation, we could see the final hyperbolic growth in the value (and price) of silver and gold. Money is the lifeblood of Capitalism and physical metals have been the foundation of Classical Capitalism. At some point in 2012-13, we could see silver prices in three digits and gold in five digits. The logic for this astronomical number is ‘fear’ in the marketplace. The final stores of value on this planet are silver and gold. Why?
Silver and Gold are metals which EXIST in spacetime. They are also metals with a 5000 year history as money. Our current money units (96%) are merely digits within our computer screens. These units DO NOT EXIST as physical units. The reality is that digits are imaginary units created ‘out of nothing’. They serve as ‘legal tender’ only while the general investment community accepts these units as money. Acceptance is based on the psychological concept of CONFIDENCE. When ‘confidence’ disappears…so do the imaginary digits in your computer screen. In reality, MONEY is based on a ‘shell game’ which is based on ‘illusionary’ CONFIDENCE.
2012 should be an interesting year for all of us, the beginning of the Deflationary scenario which I envision should start with a collapse in the banking system over in Europe. This could happen early in 2012 or it may get delayed until late 2012. It is impossible to predict the future with certainty. Watch the markets and watch what happens in the geo-political environment in Europe, the Middle East, and Asia (especially CHINA). China could also be a catalyst for major change in 2012. Enjoy and keep this website on your favorite list: http://kingdomecon.wordpress.com.
